The health of the euro area's manufacturing sector, as measured by the HCOB Manufacturing Purchasing Managers' Index (PMI) and compiled by S&P Global, recorded its fourth decline in five months in June 2024. The PMI fell to 45.8 from a 14-month high of 47.3 in May, signaling a definite acceleration in the deterioration of the manufacturing sector. This new decline means that the PMI is well below the survey average of 51.6.
At the country level, most sectors of manufacturing showed weakness in June. Greece maintained its top position in the manufacturing PMI ranking, but the index fell to its lowest level in six months. The rate of improvement also slowed in Spain and the Netherlands. In the remaining monitored eurozone countries, factory conditions worsened at the end of the second quarter. With the exception of Italy, the deterioration was more severe than in May. German manufacturing was again the worst performing in the eurozone, as it has been every month since February.
After largely stabilizing in May, factory production across the euro zone fell robustly in the final month of the second quarter, dropping at its fastest pace so far in 2024. June's output decline came amid a sharp deterioration in demand conditions, as evidenced by the new orders index falling further below the plateau of 50. Euro zone goods producers are also reporting weak sales to customers externally, with the latest survey data showing new export orders falling for the 28th consecutive month. The decline is significant and the sharpest since February, according to S&P Global.
Eurozone manufacturers cut purchases in June as production requirements were scaled back. In fact, the decline in purchasing levels was more pronounced than in May and faster than the declines seen at the same time in both production and new orders. Purchased inventories have continued to deplete every month since the beginning of 2023. June's decline was the sharpest so far this year.
Factory output was partly supported by the completion of backlogged work. Backlogs fell in June, stretching the current downward trend to more than two years. The latest survey data suggested spare capacity in euro zone manufacturing was rising, after employment was cut for the 13th consecutive month. The rate of factory job cuts was the fastest in three months.
In line with the trend for most of the past year and a half (except for January this year at the peak of the Red Sea disruptions), euro zone manufacturers reported shorter supplier delivery times in June, although the improvement in vendor performance was the weakest since February.
Meanwhile, input costs at euro zone factories rose to the first time in 16 months in June. Prices of goods leaving factories continue to fall, but the discount in charges is only modest and was the mildest in the current 14-month period of deflation, S&P Global added.
Finally, despite a general deterioration in business conditions at the end of the second quarter, business confidence remained unchanged from its 27-month high in May, meaning businesses remain optimistic about the year ahead and levels of positive sentiment remain above their long-term average.
In June 2024, the Eurozone manufacturing PMI fell to 45.8 from 47.3 in May, indicating an accelerating deterioration in the sector. The sector weakened in most countries, with Greece still leading the way despite a six-month low. Eurozone factory production fell sharply due to weakening demand and external sales. Purchases fell and inventory depletion intensified.
Fibre2Fashion News Desk (DP)
